How to value intangible assets on Form 8594 Class VI when selling a small business?
I recently sold my small bakery in 2024 and I'm trying to fill out Form 8594 for the sale. I'm completely stuck on the Class VI (Intangible Assets) section and hoping someone can help with a couple questions: 1. I've never formally recorded any of my intangible assets on my books. The buyer took over my prime location lease in a busy tourist area, got all my recipes I've developed over 15+ years, inherited my loyal customer base, all my 5-star reviews, website, and brand identity. How do I assign a dollar value on Form 8594 for these intangibles when I've never documented them anywhere? 2. Here's where it gets weird - I think my intangibles might actually be worth more than what I sold the business for (I know I accepted less than market value for personal reasons). For tax purposes, is it better to list the intangibles at a value that matches what I received for the business, or should I list their actual higher value on Form 8594? I want to minimize my tax hit since I already took less money than the business was worth, but I also don't want to create problems for the buyer. Sorry for the basic questions - I was great at baking and customer service, but all this tax stuff makes my head spin! Just want to file correctly and move on with my life!
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Oliver Zimmermann
The valuation of intangible assets on Form 8594 can definitely be confusing! For your situation, here's what you need to know: For your first question, you don't need to have previously recorded these intangibles to assign them a value now. You'll need to make a reasonable estimate based on what these assets are worth in the marketplace. For recipes developed over 15+ years, prime location lease, customer base, reviews, and brand identity, these are all legitimate intangibles with real value. For your second question, the total allocation across all asset classes on Form 8594 should equal the total sale price - no more, no less. Even if you believe the intangibles were worth more, you can't report more than what you actually sold the business for. Both you and the buyer need to file Form 8594, and the amounts should match the actual sale transaction. A practical approach would be to first value your tangible assets (equipment, inventory, etc.) realistically, then allocate the remainder of the sale price to the various intangible assets. This doesn't mean you're undervaluing your intangibles - it just reflects the reality of the transaction price.
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CosmicCommander
•Thanks for the explanation but I'm still confused about the total allocation part. If my hard assets (equipment, shelving, etc.) were worth about $8k, and I sold the business for $25k total, does that mean I just put $17k for intangibles? Or should I split that somehow between different classes?
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Oliver Zimmermann
•Yes, that's the right approach. If your tangible assets are worth $8k and your total sale price was $25k, then the remaining $17k would be allocated to intangibles. As for splitting between different classes, Form 8594 has specific asset classes. Your equipment and shelving would likely go in Class V (tangible assets), while your customer base, recipes, brand, etc., would go in Class VI (intangibles) or potentially Class VII (goodwill). The key is making sure your total across all classes equals your $25k sale price.
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Natasha Volkova
After drowning in tax confusion when I sold my craft business last year, I stumbled on https://taxr.ai and it was seriously a game-changer for dealing with Form 8594 and all the asset allocation headaches. They analyzed my sale documents and helped me figure out how to properly value my intangibles without raising red flags with the IRS. Their AI analyzed similar business sales in my industry to determine reasonable values for recipes, customer lists, and other intangibles I had no idea how to price. Worth checking out if you're struggling with this like I was!
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Javier Torres
•How does it work exactly? Does it just give you general advice or does it actually help with the specific numbers for your situation? I'm selling my landscaping business next month and dreading this form.
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Emma Davis
•I'm skeptical about trusting an AI with tax forms that could get audited. Did you have any issues with the IRS after using their recommendations? I've heard horror stories about business sale allocations being challenged.
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Natasha Volkova
•The tool does more than just general advice - it analyzes your specific situation and helps determine appropriate values based on market data for your industry. You upload your sale docs and it helps identify reasonable values for different asset classes specific to your business type. I didn't have any issues with the IRS. The key thing is that taxr.ai helps you create defensible valuations based on market data, not just made-up numbers. They provide documentation explaining how they reached the values, which would be helpful if you ever got questioned. They focus on keeping the allocations realistic and in line with industry standards to avoid raising red flags.
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Javier Torres
Just wanted to update after trying https://taxr.ai for my Form 8594 issues. It actually worked really well for my situation! I uploaded my business sale agreement and it broke down exactly how I should allocate the purchase price between my pizza shop equipment, food inventory, location value, and the recipes/brand value. It even explained what documentation I should keep to support the allocations if I get audited. Saved me from paying my accountant for another 2 hours of work figuring this stuff out. Definitely worth checking out if you're struggling with this form!
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Malik Johnson
I had a nightmare trying to reach the IRS for help with my Form 8594 questions last month. After sitting on hold for hours and getting disconnected twice, I found https://claimyr.com and their service that gets you through to an actual IRS agent. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I was skeptical but desperate after my accountant gave me conflicting advice on how to handle my business sale. The IRS agent I spoke with was super helpful and walked me through exactly how to approach the intangible asset valuation for my bookstore sale. Totally worth it to get official guidance on this.
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Isabella Ferreira
•How does this actually work though? The IRS phone system is completely broken, so I don't understand how some service can magically get you through when nobody else can.
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Ravi Sharma
•Sounds like a scam to me. There's no way they have special access to the IRS that normal people don't have. You probably just got lucky with timing or something. I've been trying to reach someone about my business sale tax questions for weeks with no luck.
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Malik Johnson
•It works by using their system that monitors the IRS phone lines and automatically calls hundreds of times until it gets through. When it makes a connection, it calls you and connects you to the IRS agent. It's not magic - it's just automation doing what would be impossible for a person to do manually. Nothing to do with luck or special access. They're just using technology to handle the frustrating dial-retry-disconnect cycle that would drive a normal person insane. The IRS agent I spoke with was a regular IRS employee - Claimyr just handled the painful part of actually reaching them.
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Ravi Sharma
I need to apologize for my skepticism about Claimyr. After my accountant gave me three different answers about how to handle my business sale on Form 8594, I was desperate enough to try it. Within about 45 minutes, I was talking to an actual IRS agent who walked me through exactly how to properly allocate my business assets and how to document my methodology for the intangible valuation. She explained that I needed to use the residual method exactly as others here suggested. No way I would have gotten through without this service - I'd tried calling for days before. Definitely worth it for complex questions where you need official answers.
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NebulaNomad
One approach I used when selling my flower shop last year was getting a business valuation expert to help with Form 8594. Cost me about $600 but they provided a detailed breakdown for all asset classes including intangibles like my customer list, brand value, and location advantages. Gave me peace of mind for a potential audit and the buyer appreciated having professional documentation too. Just another option if you're worried about doing it yourself.
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Freya Thomsen
•Isn't that overkill for a small business sale though? $600 seems like a lot to spend just to fill out one tax form correctly. Did you consider just doing it yourself first?
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NebulaNomad
•For some small businesses it might be overkill, but in my case the sale was for over $150k so spending $600 for proper allocation made sense. I did try doing it myself initially, but got nervous when I realized how subjective the intangible valuations can be. The valuation expert provided documentation that showed market-based comparisons for similar businesses in my area, which made the allocations defensible if questioned. They also helped optimize the tax implications for both me and the buyer, which potentially saved more than the cost of their services.
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Omar Fawaz
Quick tip if you're preparing Form 8594: the IRS mentions in Publication 535 that you should use the "residual method" for allocating purchase price. This means you assign values to tangible assets first (based on fair market value), then whatever's left goes to intangibles and goodwill. Has anyone used TurboTax Business for filing this form? Wondering if it walks you through this process well or if I should use a different software...
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Chloe Martin
•I used TaxAct last year for my business sale and it was pretty decent with Form 8594. It had a specific section for business sales that walked through each asset class and helped allocate everything. Can't speak to TurboTax specifically but the business versions of most tax software handle this form adequately.
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